overnight repo

Overnight repo

Overnight Repo

A practice in which a bank or other financial institution buys securities with the proviso that the seller repurchase the same securities the following day. Financial institutions do this in order to raise short-term capital. See also: Overnight loan.

overnight repo

A repurchase agreement in which securities are sold provided that they will be repurchased on the following day. Financial institutions use overnight repos as a means of raising short-term money for financing inventories.

Another tool would have a similar impact but apply more broadly, using overnight repurchase agreements that would let money market funds and other institutions as well as banks essentially make short-term deposits at the Fed.

Shaw Group, said that the Fed should use the interest rate at which it will offer overnight repurchase agreements as its "policy instrument" and that that rate should be the same as that paid banks on reserves.

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